Over the past five years, credit unions have expanded their mortgagelending efforts. Much of the sustained activity has been based in refinancing of existing debt. However at some point, home prices will stabilize and buyers will return to markets. In advance of a shift from a refinance-driven market to a purchase-driven market, credit unions focused on mortgage lending will need to take action in order to build their lending capabilities and reputations in their communities.
A starting point for credit unions to move toward a more purchase-driven market is looking at their local market data. Understanding local market analytics, evaluating competitors, and measuring volume are all critical to generating and maintainingmarket share for area consumers’ mortgages. To effectively serve consumers, an institution must be able to answer these questions:
- What is the size of my market(s)? Is it growing?
- Who are the dominant players? Are there any newcomers to observe?
- Which institutions are gaining or losing market share?
- Are there steps in our mortgage lending process that can be improved upon?
Data from Call Reports (5300) is limited in detail and only has data for credit unions, a small segment of the mortgage lending marketplace. Another source of data, the Home Mortgage Disclosure Act data, provides additional detail for all mortgage financiers,including non-depository institutions by county and MSA. Now available through Callahan & Associates’ Mortgage Analyzer, this data can answer the above questionsand more.
Snapshot of a Marketplace: Lima, OH
Lima is a city in northwestern Ohio, about halfway between Toledo and Dayton and with a population of just under 39,000. Six credit unions are headquartered there. One of these institutions, Superior Federal Credit Union ($377M) files HMDA data. A closer look at the Lima, Ohio marketplaces with Mortgage Analyzer reveals a compelling story for Superior FCU.
| Market Share for Purchase, First Lien, Owner-Occupied Mortgages |
| For The Top 3 Lenders In Lima, Ohio | Data as of December 31, 2010 |
 |
| Source: Callahan & Associates’ Mortgage Analyzer. |
In 2010, financial institutions and mortgage companies granted $284 million in mortgage loans for homes in Lima, Ohio. Like the majority of markets, most of the loans ($213 million or 75%) were for re-finances of existing debt. The purchase money in Limatotaled $69 million. Superior FCU funded 627 mortgage loans in 2010, nearly twice the mortgages of its closest competitor, Citizens National Bank, which funded 372 loans.
Lima, in contrast to some larger markets, is concentrated. The top three lenders funded 52.9% of all mortgages. Both community banks and national institutions re-gained market share lostin 2009. JP Morgan Chase, The Huntington National Bank, First National Bank of Pandora, and Wells Fargo/Wachovia all gained more than 100 basis points in 2010.
For each of the past four years, Superior FCU has retained the highest market share. Though its market share slipped in 2010, this may have been due to a strategic management decision.After significant gains in 2009, Superior FCU executives may have taken a step back to monitor the portfolio, manage their balance sheet, or develop a new product to serve the marketplace.
Superior denies a lower ratio of loans (14.5%) than their banks’ competitors (22.3%). The credit union has a similar average funded loan amount compared to its competitors as theaverage loan for the credit union is just more than $114,500, compared to the banks’ $115,800. Despite similar loan amounts the credit union may be targeting a different market segment. The average gross annual income of the funded loan borrowers is about $70,000, lower than the banks $82,000.
Finally, Mortgage Analyzer data reveals that Superior FCU sold nearly all of its loans made in 2010 to GSEs.
| Mortgage Market Scorecard For All Mortgage Loans | |||
| Data as of December 31, 2010 | |||
| Superior Federal Credit Union | Banks & Others in Market | Total Market | |
| Basic Information | |||
| Total Number Of Loans Applied For | 844 | 3,183 | 4,047 |
| Total Approved | 702 | 1,953 | 2,669 |
| Total Denied | 122 | 709 | 836 |
| Total Funded (#) | 627 | 1,825 | 2,465 |
| Total Funded ($000s) | $71,859 | $211,383 | $284,108 |
| Key Ratios | |||
| Approved/Applications Ratio | 83.18% | 61.36% | 65.95% |
| Funded/Applications | 74.29% | 57.34% | 60.91% |
| Funded/Approved | 89.32% | 93.45% | 92.36% |
| % Of Loan Denied | 14.45% | 22.27% | 20.66% |
| % Of Funded Loan – Owner Occupied (Primary) |
96.81% | 92.38% | 93.55% |
| Average Funded Loan Amount (000s) | $114.61 | $115.83 | $115.26 |
| Average Gross Annual Income of Funded Loans (000s) |
$70.19 | $81.87 | $78.76 |
| Average Gross Annual Income of Denied Loans (000s) |
$54.01 | $55.01 | $54.92 |
| Loan Type | |||
| % Of Funded Loan – Conventional | 98.56% | 81.92% | 86.25% |
| % Of Funded Loan – FHA-Insured | 0.00% | 13.81% | 10.22% |
| % Of Funded Loan – VA-Guaranteed | 0.00% | 2.85% | 2.11% |
| % Of Funded Loan – FSA/RHS | 1.44% | 1.42% | 1.42% |
| Property Type | |||
| % Of Funded Loan – 1-4 Family | 99.84% | 98.90% | 99.15% |
| % Of Funded Loan – Manufactured | 0.16% | 0.77% | 0.61% |
| % Of Funded Loan – Multifamily | 0.00% | 0.33% | 0.24% |
| Loan Purpose | |||
| % Of Funded Loan – Purchase | 23.13% | 26.68% | 25.64% |
| % Of Funded Loan – Refinancing | 76.71% | 70.68% | 72.29% |
| % Of Funded Loan – Home Improvement | 0.16% | 2.63% | 2.07% |
| Purchaser Information | |||
| % Of Funded Loans Sold | 91.39% | 79.84% | 82.47% |
| % Of Sold Loans Sold to GSEs | 99.83% | 76.80% | 83.23% |
| Most Common Purchaser | Affiliate Institution | Other Purchaser | Other Purchaser |
| Market Share | |||
| % Of Applications | 20.85% | 78.65% | 100.00% |
| % Of Loans Funded | 25.29% | 74.40% | 100.00% |
| Source: Callahan & Associates’ Mortgage Analyzer |
